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6.
VALUE CHAIN Customer Retailer Physical hardware Components are Gathered by the Manufacturer and Prepared for assembly. Manufactures assemble The video game console Using the different Hardware components. Video game consoles Packaged and ready to Be shipped to retail Stores worldwide. Video game consoles Are sold in retail stores Along with the video Games to be played on Them. Customers first Purchase the video Game console and Then purchase the Games to be played On them. This is Usually first done at The same retail Location at least for The first video Games purchased. Blank CDs or cartridges are a form of raw materials for video game software. Computer software Engineers write codes To add sound, graphics, And function to create An enjoyable video game. The final video game Whether in CD or Cartridge format are Then prepared for Distribution to retail Stores. Raw Materials Manufacturer Distributor Raw Materials Manufacturer Distributor Video Game Console (Hardware)‏ Video Game Disc (Software)‏

9.
PORTER’S 5 FORCES LOW- MEDIUM Since hardware manufacturers Wanted to make a profit on the 3DO System, they had a lot of Power over pricing and cost issues. 3DO licensed the manufacturing so they do not have much power over suppliers. They needed to Manufacture the 3DO to some Specs but the overall look and feel Differed. MEDIUM-HIGH Customers wanted enjoyable video Games whether the technology was Superior or if the system offered Other capabilities. Customers have To make the first purchase of the Console, but at such a high price ($700) this was difficult to do. Once The console was purchased, 3DO Gained back some power because Customers need to buy games to Play. LOW There are a lot of barriers to entry When trying to establish a video Game system. Crucial relationships Must be made with hardware and Software companies. Manufacturing and development Requires a lot of capital, time, and Resources. MEDIUM Substitutes to video games can Be arcade games which Sega Has mastered, amusement parks, Or even physical sports which Can make children go outside Rather than staying in to play Video games. Overall, the Industry will continue to perform Strong because there are a few Very close substitutes to video Games. HIGH There is a lot of competition within the industry With players such as Sega, Sony, and Nintendo. These companies manufacture their own Systems which allow them to take a loss on the Console in order to make up for the difference In video game sales. Price for the console is a Very competitive aspect of the industry Because once a console is purchased, further Games need to be purchased. But the Decision to purchase is mainly based on the Availability of enjoyable video games.

11.
WHY 3DO FAILED <ul><li>Special Sauce: </li></ul><ul><li>Want 50% build & 50% craft. </li></ul><ul><li>Incumbency advantage: 1st installed base. 1st 32-bit system. </li></ul><ul><li>Licensing company. </li></ul><ul><li>Multiple platforms make it difficult to write packages, market structure unfair, royalties are silly. 3DO provides the technology and market structure to solve this. </li></ul><ul><li>Failed Because: </li></ul><ul><li>CD-ROM based software had higher development costs ($2 million/title). </li></ul><ul><li>Longer development times for video games. </li></ul><ul><li>Expensive ($700 for Panasonic REAL Interactive Multiplayer and $75 for games). </li></ul><ul><li>Too much offered too fast. No focus. </li></ul><ul><li>Too many partners (750 3DO software licensees, 40 titles, 60 more promised). </li></ul><ul><li>3DO wanted to be a licensing company. Didn’t want to do own title development. </li></ul><ul><li>Software development for M2 Accelerator too late. </li></ul><ul><li>$3 surcharge to software developers on every disc sold on top of $3 royalty for Market Development fund ($1 for advertising and promotion of 3DO machine, $2 to manufacturers to expand supply and price aggressively). </li></ul><ul><li>3DO hardware manufacturers have to absorb losses of $200 million for next 15 months. </li></ul><ul><li>Targeted mass consumers with casual and social game themes. Market not developed yet. </li></ul><ul><li>*OVER-HYPED. PROMISED TOO MUCH. “INTERACTIVE MULTIPLAYER” (AUDIO, VIDEO, PHOTO) INSTEAD OF “VIDEO GAMES”. LICENSED INSTEAD OF MANUFACTURED OWN SYSTEMS. THEREFORE, MANUFACTURERS HAD TO MAKE MONEY FROM HARDWARE ITSELF UNLIKE OTHERS (SEGA OR NINTENDO) WHO COULD TAKE A LOSS WITH SOFTWARE SALES. $700 TOO EXPENSIVE. FEW ARCADE-STYLE TITLES THAT WERE POPULAR ON 16-BIT SYSTEMS, “EXCLUSIVE” TITLES TANKED, PRICE TUMBLED DRAMATICALLY, SATURN AND PLAYSTATION TOOK OVER! </li></ul>

12.
WHAT 3DO SHOULD HAVE DONE <ul><li>RECOMMENDATIONS: </li></ul><ul><li>DON’T BE THE “ALL-IN-ONE BOX”. FOCUS ON VIDEO GAMES. </li></ul><ul><li>MANUFACTUER SYSTEM IN-HOUSE OR HAVE ONE EXCLUSIVE PARTNER TO HAVE ONE DISTINCT SYSTEM COMPATIBLE WITH ALL GAMES. </li></ul><ul><li>INCLUDE MORE THAN ONE CONTROLLER PORT FOR MULTIPLAYERS AND MORE BUTTONS FOR PLAYING WITH POPULAR GAMES. </li></ul><ul><li>LOWER THE PRICE FOR THE SYSTEM. TAKE A LOSS AND WIN BACK PROFIT THROUGH VIDEO GAMES. </li></ul><ul><li>DON’T NEED TO FOCUS ON BETTER LOOKING, CUTTING EDGE GAMES, BECAUSE SOME SIMPLE GAMES ARE MORE FUN TO PLAY. </li></ul><ul><li>FOCUS ON PRODUCING STANDOUT GAMES: FIFA SOCCER, MADDEN FOOTBALL, ETC. </li></ul><ul><li>COMMUNICATE TECHNOLOGY: FIRST 32-BIT SYSTEM, SURROUND SOUND, S-VIDEO SUPPORT </li></ul>